Merck (NYSE: MRK)'s pain killer Vioxx allegedly caused a number of deaths and illnesses. Eventually 27,000 lawsuits were filed against the company, causing a potentially catastrophic liability.
Today, it appears that Merck will settle most claims for $4.85 billion. According to The Wall Street Journal, "an agreement is expected to be announced Friday morning in New Orleans, where a federal judge is overseeing the litigation." The litigation over the effects of the drug have dragged on for three years. The paper adds that "the company currently has set aside $720 million for its Vioxx legal defense costs, which doesn't include any potential damages to plaintiffs."
Some suits are not part of the settlement, but the accord would end the great majority of cases.
Did Merck pay too much for relief of its litigation problems? Perhaps. Based on the company's financial information, the Vioxx matter was costing the company over $600 million a year. And it might have lost some of the cases. But $4.85 billion covers a lot of legal fees over the next decade, and Merck has won several high-profile Vioxx cases in the last year or so.
But the settlement does give the company some peace and the chance to move forward with its normal business without the cloud of liabilities from Vioxx hanging over its head. From that standpoint, Merck may have gotten off cheap.
Douglas A. McIntyre can is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
11-09-2007 @ 8:30AM
Chuck said...
As usual the Lawyers will be the ones that gain the most.
11-09-2007 @ 8:30AM
bikerchick44 said...
i donot know why is was even put on the market .because it cause more site effect.to some people.biker chick
11-09-2007 @ 10:02AM
Josh Duyal said...
IT'S JUST ANOTHER SUCCESSFUL PLOY BY THE TRIAL LAWYERS. PHARMACEUTICALS ARE THE ONLY LEGITIMATE PRODUCTION LEFT IN THIS COUNTRY AND THEY WANT TO DESTROY THE WHOLE THING, ALONG WITH THE HEALTH SYSTEM ITSELF.
11-09-2007 @ 11:30AM
BAB said...
Yes, they probably did get off cheaply. Based on some of the published statistics, their exposure was possibly 100,000 events, not including those that couldn't be told from Vioxx events. At a million each, say, it could have added up.
11-09-2007 @ 12:19PM
eric said...
This was a great move by Merck! It will reduce the amount of creative energy the company needs to put into what is really a non-productive issue. Now, an even greater focus can be put on the company's primary mission: developing drugs that improve and save lives. Merck is a great, and highly ethical, company that briefly lost its way during the Gilmartin years. It is well on the path to recouping its past reputation and its past productivity and contributions to society.
11-09-2007 @ 12:59PM
Sheldon L said...
Merck's great management simply did the math. $500m to $600m per year for ten years plus whatever actual payments were made might cost double. The plaintiffs counsel did the math also. They could take their 35% of the settlement... $1.73 billion now or perhaps an equivalent amount of money but after ten years of work. Makes sense for Merck and the plaintiffs lawyers. The actual plaintiffs were probably looking for a bigger payday but they avoid courtroom dramas and can put this behind them as well.
11-10-2007 @ 1:52PM
eric said...
This is a great move by Merck! Now, the company can resume its focus on its primary mission: the development and production of medicines that improve and save lives. Hopefully, this move will reduce the amount of creative energy that needs to be diverted into a non-productive and distracting side issue. Merck can now accelerate its return to the highly productive and ethical company it was before the unfortunate Gilmartin years. Hopefully, it will again become the pre-eminent drug company it was before those years of mismanagement and mis-steps.